EDITORIAL: Finance firms wake up to biodiversity decline risks
Natural Capital aims to raise up to $10bn by 2022 through investments from institutional investors
A 2020 assessment of Earth paints yet another disturbing picture of how human actions are laying to waste its natural systems.
A cursory glance at the 83-page “Living Planet Report” by the World Wildlife Fund, the top organisation in wildlife conservation and endangered species, shows that since the Industrial Revolution more than three-quarters of the Earth’s ice-free land surface has been altered, most of the oceans have been polluted and more than 85% of the area of wetlands has been lost.
This destruction of ecosystems has led to a more than 70% drop in the average size of the wildlife population and about a million species of both animals and plants being threatened with extinction over the coming decades to centuries, the report reads.
The reasons behind the dramatic loss in the last few decades have been well documented: forests have been felled to grow crops and much of the ocean has been overfished. These trends have largely been driven by a doubling in the world’s human population, a fourfold increase in the global economy and a ten-fold rise in trade.
We have reached the point where human demand has exceeded much of the planet’s ability to replenish.
Just as the harsh reality that carbon emissions are bad for the environment inspired companies from tech giant Apple to banking behemoth HSBC to lay out plans to remove greenhouse gases from their sprawling businesses, activists such as world-renowned David Attenborough are trying to widen the campaign about climate change towards also protecting and conserving biodiversity.
One of those businesses that have seen created a potential win-win for nature and investors is Lombard Odier Group, the Swiss wealth and asset manager that recently opened an office in SA
Few dispute the moral logic of doing so. Protecting nature makes the planet more resilient to environmental shocks and negative changes.
Other than that, there is huge potential for a win-win for the global economy if businesses and investors work towards protecting and restoring natural capital — the world’s stocks of natural assets that include soil, air, water and all living things.
After all, businesses depend more on nature than previously thought, with more than half of the global economy, or $44-trillion, in some way or another dependent on the direct extraction of resources from forests and oceans or the provision of ecosystem services such as soils, clean water, pollination and a stable climate, according to a report by the World Economic Forum.
One of those businesses that have created a potential win-win for nature and investors is Lombard Odier Group, the Swiss wealth and asset manager that recently opened an office in SA.
It has joined forces with HSBC, climate change advisory firm Pollination Group and private equity group Mirova to launch a new asset management venture to invest in companies and projects that seek to harness the power of nature and contribute to its restoration.
For investors the fund heralds the beginning of a new investment category that comes while funds are under increasing pressure from clients to pull their money out of companies that contribute to climate change and put it into ones that have set science-based targets for removing carbon emissions.
The new venture — Natural Capital — aims to raise up to $10bn (R150bn) by 2022, targeting investments from institutional investors — including sovereign wealth funds, pension funds and insurers — into natural capital investments.
Axa Investment Managers, the asset management of French insurer Axa, is also among a few companies in finance that have woken up to the risks posed by the decline in biodiversity after the launch in 2019 of a €200m impact fund to invest in projects that protect natural habitats.
As the WWF lamented in 2020 that biodiversity-related financial risks have been ignored, suggesting that there are few commitments to address it, it would be naive to think that funds dedicated to protecting nature will become mainstream soon.
But the good news is that Axa, Lombard, HBSC, Pollination Group and Mirova are part of a small but expanding group of investors and businesses that is bringing biodiversity the same sort of attention that has been building about climate change and greenhouse gases.
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